Croatia rejects only bid for ailing shipyard

(ZAGREB) - The Croatian government on Thursday rejected the only offer to buy one of its ailing state-run shipyards, the privatisation of which is key for the country's bid to join the European Union.

The offer of Germany's Crown Investment, a subsidiary of Vienna-based A-TEC Industries, for the 3. maj shipyard in the northern port of Rijeka, was rejected as it "does not meet obligatory tender conditions," the government said on its website.

Earlier this month A-TEC Industries informed Zagreb that it had not managed to solve the problems which caused it to declare itself insolvent last year, Economy Minister Djuro Popijac was quoted as saying by HINA news agency.

The government will launch a new bid to sell 83.32 percent of the 3. maj shipyard for a symbolic price of 1 kuna (0.13 euros, 0.18 dollars), Popijac said.

The conditions will be same as in the two previous privatisation rounds, meaning that the investors would have to take over at least 40 percent of its restructuring costs.

3. maj is one Croatia's six state-owned shipyards that Brussels has asked to be restructured as part of the country's talks to join the European Union. Croatia has entered the final phase of accession talks and hopes to become the bloc's 28th member in 2012.

The country's shipbuilding industry receives heavy government subsidies that will have to stop once the country joins the EU.

Experts warn that Croatian shipyards need a radical overhaul, saying they are technologically not up to date and suffer from low productivity, overstaffing and outdated management.

Of the six state-owned shipyards only Uljanik in the northern port of Pula is solvent.

The first attempt to privatise them failed in 2009 when the only two offers were rejected by the government.